Learn how to fix the top 15 money problems

Our experts answer your top money questions about RRSPs, income taxes, morgage rates and more.

By Deena Waisberg

Top money problems: 1-3
This story was originally titled "Your Top Money Stressors Solved" in the February 2010 issue. Subscribe to Canadian Living today and never miss an issue!

1. I am locked into a mortgage with a 5.3 per cent interest rate for the next three years, but interest rates are much lower now. Can I get a better deal?
It's worth looking into. You might be able to renegotiate a mortgage with a lower interest rate, but you may have to pay a penalty to break your current mortgage. "The penalty will depend on how many months are left in the existing mortgage," says Anna Clarkson, a branch manager with Scotiabank in Calgary. You can also ask if you can blend the old and new rates, which may not carry any penalty. Make sure to ask about penalties, though. "Some can be exorbitant and it may not be worth it," says Preet Banerjee, a money expert on the W Network and the author of RRSPs: The Definitive Book on Registered Retirement Savings Plans (Lulu.com, 2008).

2. I owe a lot on my credit cards. Can I withdraw money from my RRSP to pay off my debts, then pay the RRSP back without any penalty?
When you withdraw money from your RRSP, it is taxed as if it were regular earned income, says Banerjee. There are only a few exceptions – such as withdrawing for the federal government's First-Time Home Buyers' Plan – but using the money to pay down credit cards isn't one of them. So, should you withdraw the money? Do the math, says Banerjee. If you are in a high tax bracket (for example, 46.41 per cent is the highest in Ontario), you might end up paying more in taxes than you'd pay in interest on your credit card debt, so it wouldn't be worth it. But if you are in a lower tax bracket, it might make sense.

3. My siblings and I have talked about buying and then renting out a condo. Is this a good idea?
You need to have a good relationship with your siblings, because you must be able to agree on renovations, repairs and who is going to look after the property. Also, be sure to consider whether everyone can afford the venture. "Sometimes it's difficult to rent a property out, so you'll [all] have to cover the expenses while the property is vacant," says Bill Alexander, an Edmonton-based tax consultant. If you decide to go ahead with the deal, it's a good idea to draw up a legal agreement that outlines everyone’s responsibilities.

Page 1 of 5 – Learn what happens to your RRSP during a divorce on Page 2



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